Last Night's Biggest Snub? Taxpayers

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.

February 25, 2013 - 22:04 — CAGW Staff

Last night, as you may have heard, America's film industry threw itself a massive party, and while some of the attendees looked to be in danger of starving, none of them looked especially poor. Anyhow, today the media is buzzing over Ang Lee's upset and the 22-year-old Jennifer Lawrence's win for Best Actress. However, before the Oscars began, Glenn Reynolds (of Instapundit fame) pointed out an Oscar injustice that should have moviegoers across the country livid: the billions in tax breaks and giveaways handed to movie studios each year. Here's Reynolds, from Saturday's Wall Street Journal:

With campaign season over, you're not likely to hear stars bringing up taxes at this weekend's Academy Awards show. But the tax man ought to come out and take a bow anyway. Of the nine "Best Picture" nominees in 2012, for example, five were filmed on location in states where the production company received financial incentives, including "The Help" (in Mississippi) and "Moneyball" (in California). Virginia gave $3.5 million to this year's Oscar-nominated "Lincoln." Such state incentives are widespread, and often substantial, but they don't do much to attract jobs. About $1.5 billion in tax credits and exemptions, grants, waived fees and other financial inducements went to the film industry in 2010, according to data analyzed by the Center on Budget and Policy Priorities. Politicians like to offer this largess because they get photo-ops with celebrities, but the economic payoff is minuscule. George Mason University's Adam Thierer has called this "a growing cronyism fiasco" and noted that the number of states involved skyrocketed to 45 in 2009 from five in 2002.

Former Governor of New Mexico Bill Richardson, whose administration was especially kind to Hollywood, was roundly (and rightly) mocked when he suggested back in 2011 that all states should be engaging in the type of Tinseltown wooing that New Mexico did. If every state offers a sweetheart deal to every Affleck and Spielberg around, no individual state has an advantage. States start offering more and more cash (or forgoing more and more revenue) and the odds of, say, Michigan's film project becoming a worthwhile investment get slimmer and slimmer. Take Detroit, for example, where Reynolds says tens of millions of taxpayer dollars turned into a studio that "employed only 15-20 people." And yet, states are climbing over one another to offer the sweetest possible incentives, resulting in a race to the bottom that leaves taxpayers holding the bag. Here's Reynolds again:

The $1.5 billion in subsidies that states provide, according to the Center on Budget and Policy Priorities, "would have paid for the salaries of 23,500 middle school teachers, 26,600 firefighters, and 22,800 police patrol officers."

Those expenses don't disappear just because E.T. got to phone home from the governor's backyard. Instead, they fall on the ordinary plumbers, bus drivers, accountants, and other non-celebrities in the states that subsidize the movies. That's not just bad policy, it's regressive and immoral. The obvious counter-argument to the case against film subsidies is that film production will leave the United States entirely if other nations offer especially tasty handouts. But even if that's true, it's not clear what the downside would be. If Canada (for example) wants to subsidize American movies that will be enjoyed largely by Americans, so be it. If the Canadian government wants to chip in some cash for our roads while they're at it, so much the better. Bad policies abroad should not require an equally bad American response. Nor are those bad policies limited to state governments. As the Wall Street Journal's editorial page stated on January 2, when Congress raised taxes on high earners earlier this year they also preserved enough special-interest tax breaks to fill a Rolls-Royce. Among the beneficiaries was America's film industry, since the bill "extend[ed] for two years, through 2013, the provision that allows film and television producers to expense the first $15 million of production costs incurred in the United States ($20 million if the costs are incurred in economically depressed areas in the United States)." All of this is madness in a country where the national government and many individual states are going broke. America's film industry is doing just fine and will continue to do so with or without government coddling. On behalf of taxpayers everywhere, we at CAGW are mad as hell, and we're not going to take it anymore.